Not long ago, I helped a friend start with 20,000 yuan and within three months, he made it to 180,000 yuan. At first, he was obsessed with doubling his money, resulting in three consecutive liquidations in one week, which left him emotionally shattered and wanting to exit the market.
Later, I advised him to follow the eight iron rules I set—don’t rush, don’t go all in, and go with the trend. As a result, he not only recovered his losses but also steadily increased his capital ninefold.
I have guided many friends who trade contracts, from initially facing daily liquidations to eventually making consistent profits, all thanks to the eight iron rules I repeatedly emphasize.
Each rule is a lesson learned from mistakes; missing even one could lead to painful consequences.
1. Stop after consecutive losses
Contracts involve leverage, and losing money is normal, but rushing to recover losses after a stop loss is an accelerator for liquidation. Remember, if you face consecutive stop losses more than three times, immediately stop and review your trades; wait until both your state and the market conditions stabilize before re-entering.
2. Don’t treat contracts like a casino
Contracts are not a shortcut to getting rich overnight, nor are they a high-stakes gamble. The outcome of going all in is almost always a total loss. If you want to survive long-term, your position must be manageable.
3. Go with the trend
If you short the market while prices are rising or try to catch a falling knife during a crash, you are essentially asking for trouble. The trend is your friend; going against it is a direct confrontation with the market, and the outcome is predictable.
4. The risk-reward ratio must be favorable
Before opening a position, calculate the numbers: if your stop loss is 10,000, you should at least have a potential profit of 20,000 to make it worthwhile. Maintaining a 1:1 risk-reward ratio for extended periods will only turn you into a laborer for the exchanges.
5. Control trading frequency
Feeling uncomfortable after a day without trading is a common issue for beginners. Forcing trades without opportunities can eat into your profits due to transaction fees. Learn to wait to seize the most lucrative opportunities.
6. Avoid markets you don’t understand
Suddenly surging altcoins or inexplicable price spikes and drops should be avoided if you can’t comprehend them. Money earned by luck will eventually be lost.
7. Stop loss is a lifesaver
Hoping a position will recover is a major taboo in contract trading. Unlike spot trading, liquidation can happen in an instant. A stop loss is like a seatbelt—it may be uncomfortable but can save your life.
8. Stay calm when making profits
When making money, it’s easy for people to become overconfident, leading to oversized positions, no stop losses, and hasty trades. The market excels at teaching lessons to those who are overconfident; the more successful you are, the more you need to maintain your composure.
